Flagship community trust, Foundation North, has booked a more than $52 million investment loss over the 12 months to the end of March as assets under management reversed by about $110 million.
Negative returns combined with an $18 million year-on-year jump in grants to reach $70.6 million and close to $9.2 million in admin expenses ($8.8 million in 2022) for a total deficit of almost $130 million.
Foundation North saw assets under management slide to $1.6 billion from $1.7 billion during the year, although the charitable fund remains by far the largest of the 12 community trusts in NZ.
While internal costs rose over the 12-month period, the trust pared back upfront funds management, custody and investment advisory fees to a tad above $1.2 million from more than $1.4 million in the previous year: however, it is understood other investment costs are accounted for internally among the 30 underlying managers on the Foundation North list (advised by Australian consultant, JANA).
According to the just-released annual report, the $52 million investment loss “translated into a return of -3.2 % net of fees (2021-22: +8.7%) relative to the benchmark composite index, which returned -1.2% for the financial year (2021-22: +4.3%)”.
“… The portfolio’s trailing ten-year performance was +7.8% net of fees, favourable to the ten-year benchmark composite index of +6.3% (2021-22: +8.7% actual, +7.2% benchmark). The since-inception return of +7.6% net of fees has outperformed both the benchmark composite index return of +5.8% and the long-term investment objective (CPI + 4.5%) being +7.3% over 29 years.”
Michelle Tsui, Foundation North investment committee chair, says in the report that the 2022/23 portfolio result was the “only the second negative return we have seen since the Global Financial Crisis in 2008”.
Tsui says the community trust held enough reserves to meet spending objectives while “we have confidence our portfolio is well positioned to continue its growth over the long term”.
Reserves stood at over $432 million as at March 31 this year compared to $633 million at the same date in 2022.
JANA took over as Foundation North adviser from Cambridge Associates in December 2021 but the reported investment strategy follows the same ‘bucket’ approach, grouping allocations by growth, diversification, inflation and deflation labels.
Deflation was the big loser for the latest 12-month period with the portfolio shedding almost $75 million to close at $200 million; the inflation portfolio defrayed the pain somewhat, rising to $216 million from the previous $204 million.
The report shows the number of underlying managers remains steady at 30 under the JANA regime, although the individual components may have changed.
Like several other community trusts, Foundation North has expanded into impact investing in recent years with about $20 million currently allocated to the strategy.
“The fund is capably managed by Soul Capital based in Auckland and is actively seeking impact investments that align to our granting focus areas,” Tsui says. “The fund has undertaken four investments to the 31st March 2023 which we are encouraged by, and we have a strong pipeline of opportunities.”
As well as JANA, the Foundation North investment committee sources advice from MyFiduciary principal, Aaron Drew, she says in the report.
Last November the community trust also named former ASB business bank divisional finance partner, Alexandra Corbett, in the newly created role of head of investment and finance.